Private Bank's Profits, Assets, Inflows Rose in 04

In a sign that private bankers are back in business, profits, assets managed and inflows of money to private banks rose in 2004, according to a study compiled by Scorpio Partnership and released Tuesday.

Pre-tax profits in the private banking sector rose an average 23.8% on the year in dollar terms, according to Scorpio's private banking benchmark study, while assets under management rose 13.1%.

"The private banking industry is firmly back on its feet for the first time in this decade," Sebastian Dovey, partner at Scorpio, said.

Net new money growth, a reliable and closely tracked indicator of a private bank's health, recorded a 61.6% jump in 2004, according to the study. Private banks reviewed for the Scorpio benchmark now manage more than $6 trillion overall in fee-based assets worldwide. There are various reasons for what Scorpio terms the turnaround in 2004 after an extended period of flat performance. Part of the credit goes to restructuring operations within banks, the study says, coupled with cost-cutting efforts.

"The figures indicate that re-positioning at many firms is now feeding through to the bottom line," Dovey says. Improving markets also played a role, encouraging clients to reinvest their assets gradually, via private banks. Dovey said more sensible business models on the part of banks and a sharper focus on the people advising wealthy individuals should - markets permitting - make the industry's renewed vigor sustainable.

The benchmark shows that UBS AG's (UBS) wealth management business leads the pack in terms of assets under management, followed closely by Merrill Lynch & Co.'s (MER) private client group. J.P. Morgan Chase & Co (JPM), which pulled ahead in the ranking, and Deutsche Bank AG (DB), which slipped one spot, round out the top five by assets.

Scorpio, a strategic consultancy for the private banking industry, compiled data on 58 private banking operations for the benchmark.